The National Credit Union Administration reprimanded Puerto Rico's corporate credit union May 31, requiring a reduction in its activities.

Hato Rey-based Federacion de Cooperativas Federacion currently acts as both a trade group and as a liquidity center for credit unions.

The NCUA slapped the $103 million-asset corporate with a letter of understanding and agreement requiring it to spin off operations that are better done by trade groups.

Members of Federacion's board will meet June 16 to vote on such a split.

NCUA Chairman Norman E. D'Amours acknowledged the supervisory action in an interview, but refused to provide specifics such as what activities the agency wants to see spun off.

The agency acted, he said, to ensure that the corporate's problems will not affect federally insured credit unions in Puerto Rico.

"Our only concern was that federally insured institutions might be negatively impacted," he said.

The NCUA is trying to get a handle on the Puerto Rican credit union industry because the U.S. commonwealth wants to gain federal insurance for 200 state-chartered credit unions with $2.6 billion in assets that are insured by Prosad, a beleagured private insurer.

There are 30 federally insured institutions with $243 million of assets in Puerto Rico.

H. Allen Carver, director of the agency's southeastern region, heads a task force Mr. D'Amours created in April to monitor events in Puerto Rico.

Federacion "needs to focus its efforts in being a good corporate," Mr. Carver explained in a separate interview. "It doesn't need its resources diverted to be a league."

The close ties between some corporate credit unions and trade groups are being scrutinized by both Congress and the regulator.

Federacion also defied NCUA by purchasing check processing equipment after the agency denied the purchase.

"They wouldn't take actions contrary to our position and not be called into account," Mr. D'Amours said.

Federacion executive president Jose Marrero and board chairman Julio Cruz both resigned before the letter was issued. The letter didn't require their resignation, Mr. Carver said.

Dan Campen, vice president and controller for U.S. Central Credit Union, has been acting as an interim manager for Federacion since May 31, according to U.S. Central spokesman Kevin Keller.

The agency became concerned with Puerto Rico early this year because of problems suffered by Prosad, the private insurer, Mr. D'Amours said.

Wracked by the failures of several large credit unions, Prosad is $15 million in the red, said Warren G. Heller, an analyst for Wakefield, Mass.-based Veribanc Inc.

According to Veribanc, 10 of the largest state-insured credit unions in Puerto Rico, with about $770 million of assets, are poorly capitalized.

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